Today: Facebook highlights its mobile efforts in an earnings report that exhibits growth in revenues, but a drop in profits due to heavy spending. Also: Wall Street drops on report of shrinking economy, Research in Motion shows off new offerings, name.

Facebook's mobile efforts pay off, but investors still wary

Facebook ended its IPO year with momentum on its side, as the Menlo Park social network's earnings report issued Wednesday showed mobile usage surpassing desktop just as the company is beginning to show fruit from the pursuit of mobile revenues.

Facebook reported revenues of $1.58 billion for the final three months of 2012, a 40 percent increase from the same quarter a year ago, though profits descended to 3 cents a share as the company spent heavily on employees and infrastructure to build for the future. Without the one-time costs, Facebook's profits were 17 cents a share, beating Wall Street projections of 15 cents a share on revenues of $1.53 billion, according to Thomson Reuters.

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The most important numbers in the report focused on mobile usage and revenues. Facebook announced that it now has more daily average visitors on mobile devices than desktop, with 680 million of its 1.06 billion monthly active members accessing the social network through its mobile applications. Facebook was able to leverage that usage, pushing its mobile advertising revenue to 23 percent of its total advertising revenue, a gain from 14 percent the previous quarter, when the company announced that statistic for the first time. total income from mobile advertising more than doubled to $305 million in the quarter.

"Today there's no argument. Facebook is a mobile company," Zuckerberg said on a conference call with analysts, later adding "We started off the year with no ads on mobile ... (and) ended with 23 percent of ad revenue coming from mobile"

After its record-breaking May initial public offering, Facebook stock plummeted as analysts and investors doubted the company's ability to monetize its mobile users, which the company admitted was a weak spot. However, Facebook has focused on pushing ads into users' mobile news feeds and openly pushed into other possible revenue-generating areas in order to satisfy investors, which has helped push its stock back up.

"They said they were going to focus on mobile and they have executed there," Edward Jones investment analyst Josh Olson told the Mercury News on Wednesday.

Facebook shares did not immediately react positively to the report despite the mobile advances, with shares dropping 10 percent immediately after the release. However, prices quickly returned to the $30 level they have bounced around for the past few weeks, though there was an after-hours drop of about 4 percent on concerns about Facebook's heavy spending, which pushed operating expenses up 82 percent.

"More mobile revenue means way more spending on the operations of selling ads," Pivotal Research Group analyst Brian Wieser told Bloomberg News. "This is an expensive company to run."

In Wednesday's regular session, Facebook gained 1.5 percent to close at $31.24.

Stocks decline as report shows decline in U.S. economic growth

Wall Street's hot start to 2013 hit a speed bump Wednesday, as bad news arrived on the economic front: The federal government reported that the United States' gross domestic product actually shrank in the final three months of the year, the first time the U.S. economy has contracted since 2009.

The Commerce Department's report showed that GDP dropped 0.1 percent at an annualized rate in the fourth quarter of 2012 due to a mix of private-sector slowdowns -- possibly caused by uncertainty from the "fiscal cliff" negotiations -- and a steep cut in military spending.

Despite the contraction, economists were not concerned, saying the result was due to special, one-time factors that will not continue to effect the still-recovering U.S. economy. Capital Economics economist Paul Ashworth called it "the best-looking contraction in U.S. GDP you'll ever see," and IHS Global Insight director of financial economics Paul Edelstein told Bloomberg News, "This is not a recessionary signal by any means."

In fact, JPMorgan economist Michael Feroli told Reuters the dip was good news for the future, as it "leaves the economy relatively well-positioned heading into the first quarter."

Investors still didn't care for the news, however, sending all three indexes down on the day, a rare occurrence in a month that has been very strong for the markets. The 0.4 percent drop for the Standard & Poor's 500 was its biggest one-day drop so far in 2013, an example of how positive the year has been so far.

Research in Motion takes the stage, Electronic Arts still struggling

Tech stocks were on line with the overall market, as the Nasdaq also fell 0.4 percent and the SV150 index of Silicon Valley's largest tech companies declined 0.3 percent.

The biggest event in tech did not come from Silicon Valley on Wednesday, however: Research in Motion showed off its long awaited new mobile operating system, along with two new phones, in a series of events worldwide. The Canadian company also announced it is changing its name to BlackBerry, the brand name of its formerly iconic smartphones that have been overtaken by Apple's (AAPL) iPhone and devices running Google's (GOOG) Android operating system. The announcement didn't help the company's stock price: After a prolonged rally going into the launch party, the stock dropped 12 percent Wednesday on the Nasdaq.

Wednesday's non-Facebook entry in Silicon Valley's earnings season was Electronic Arts (ERTS), the video game maker that faces pressure as cheap mobile games overtake the more labor-intensive console games the Redwood City company has made its name on. EA's problems were not solved in the holiday-shopping quarter of 2012, as revenues declined from more than $1 billion in the 2011 quarter to $922 million, resulting in a loss of 15 cents a share. Shares fell almost 2 percent in after-hours trading following a gain of 0.9 percent in regular trading.

And the widely watched Standard & Poor's 500 index: Down 5.88, or 0.39 percent, to 1,501.96

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.